“US Housing Market Posts $2.3 Trillion Drop, Biggest Since 2008” was a recent headline from Bloomberg.
Yahoo finance reported that “the total value of San Francisco homes fell 6.7% in December, to $517.5 billion, a $37.3 billion decline year over year.”
That’s a whole heckuva lot of money! Should the everyday homeowner be worried?
To put the headline from Bloomberg into perspective: If you read further into the article (always avoid taking a headline at face value!), they go on to elaborate that as of December 2022, the housing market was still up 6.5% from December 2021. Additionally, using data from the Federal Reserve Bank of St. Louis, we can see that from the third quarter of 2020 until just two years later in 2022, the median house price increased OVER 30%! So while a 4.9% drop may seem big, is this a sign of things to come or just a reflection of housing increasing so much over the past couple of years? Maybe even just a reflection of mortgage rates rising, and therefore decreasing the amount of home that people can afford?
With this information in mind, as a real estate investor, especially short term, this may be bad news as you could have lost money in a home you were looking to flip. Same outlook for sellers looking to make the most money off their home as possible. However, for home buyers, finally some good news! With mortgage rates increasing, it’s a good sign that the price of homes decreasing allows for a bit more affordability!
And for homeowners: the rise and fall of house prices should not have any effect on your monthly mortgage, especially if you have a 30 year fixed rate mortgage. And falling home prices could even help save a bit of money on property taxes! This is due to property taxes being based on the value of your home.
This quick article was just a reminder to always look beyond the headlines! Headlines are designed to get readers’ attention, so make sure to understand what they mean, and do your own research as well! And let me know how housing prices are affecting you, and what your thoughts are!